G.R. No. 158881. April 16, 2008.

PETRON CORPORATION, petitioner, vs. MAYOR TOBIAS

M. TIANGCO, and MUNICIPAL TREASURER MANUEL
T. ENRIQUEZ of the MUNICIPALITY OF NAVOTAS,
METRO MANILA, respondents.

Taxation; Local Government Code; Section 133 prescribes the

limitations on the capacity of local government units to exercise their
taxing powers otherwise granted to them under the Local
Government Code (LGC); Two kinds of taxes which cannot be
imposed by local government units.·Section 133 prescribes the
limitations on the capacity of local government units to exercise
their taxing powers otherwise granted to them under the LGC.
Apparently, paragraph (h) of the Section mentions two kinds of
taxes which cannot be imposed by local government units, namely:
„excise taxes on articles enumerated under the National Internal
Revenue Code [(NIRC)], as amended‰; and „taxes, fees or charges on
petroleum products.‰
Same; Same; Excise Tax; The current definition of an excise tax
is that of a tax levied on a specific article rather than one upon the
performance, carrying on, or the exercise of an activity.·It is evident
that Am Jur aside, the current definition of an excise tax is that of a
tax levied on a specific article, rather than one „upon the perfor​-
mance, carrying on, or the exercise of an activity.‰ This current
definition was already in place when the LGC was enacted in 1991,
and we can only presume that it was what the Congress had
intended as it specified that local government units could not
impose „excise taxes on articles enumerated under the [NIRC].‰
This prohibition must pertain to the same kind of excise taxes as
imposed by the NIRC, and not those previously defined „excise
taxes‰ which were not integrated or denominated as such in our
present tax law.
Same; Same; Same; Starting in 1986, excise taxes in this
jurisdiction refer exclusively to specific or ad valorem taxes, imposed
under the National Internal Revenue Code (NIRC).·It is quite
apparent, therefore, that our current body of taxation law does not
explicitly accommodate the traditional definition of excise tax
offered

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* SECOND DIVISION.

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by Petron. In fact, absent any statutory adoption of the traditional

definition, it may be said that starting in 1986 excise taxes in this
jurisdiction refer exclusively to specific or ad valorem taxes imposed
under the NIRC. At the very least, it is this concept of excise tax
which we can reasonably assume that Congress had in mind and
actually adopted when it crafted the LGC. The palpable absurdity
that ensues should the alternative interpretation prevail all but
strengthens this position.
Same; Same; Same; Congress has the constitutional authority to
impose limitations on the power to tax of local government units and
Section 133 of the Local Government Code (LGC) is one such
limitation.·Congress has the constitutional authority to impose
limitations on the power to tax of local government units, and
Section 133 of the LGC is one such limitation. Indeed, the provision
is the explicit statutory impediment to the enjoyment of absolute
taxing power by local government units, not to mention the reality
that such power is a delegated power. To cite one example, under
Section 133(g), local government units are disallowed from levying
business taxes on „business enterprises certified to by the Board of
Investments as pioneer or non-pioneer for a period of six (6) and (4)
four years, respectively from the date of registration.‰
Same; Same; Same; The prohibition with respect to petroleum
products extends not only to excise taxes thereon, but all „taxes, fees
and charges.‰·The language of Section 133(h) makes plain that the
prohibition with respect to petroleum products extends not only to
excise taxes thereon, but all „taxes, fees and charges.‰ The earlier
reference in paragraph (h) to excise taxes comprehends a wider
range of subjects of taxation: all articles already covered by excise
taxation under the NIRC, such as alcohol products, tobacco
products, mineral products, automobiles, and such non-essential
goods as jewelry, goods made of precious metals, perfumes, and
yachts and other vessels intended for pleasure or sports. In
contrast, the later reference to „taxes, fees and charges‰ pertains
only to one class of articles of the many subjects of excise taxes,
specifically, „petroleum products.‰ While local government units are
authorized to burden all such other class of goods with „taxes, fees
and charges,‰ excepting excise taxes, a specific prohibition is
imposed barring the levying of any other type of taxes with respect
to petroleum products.

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Petron Corporation vs. Tiangco

Same; Same; Same; Even absent Article 232, local government

units cannot impose business taxes on petroleum products.·
Assuming that the LGC does not, in fact, prohibit the imposition of
business taxes on petroleum products, we would agree that the IRR
could not impose such a prohibition. With our ruling that Section
133(h) does indeed prohibit the imposition of local business taxes on
petroleum products, however, the RTC declaration that Article 232
was invalid is, in turn, itself invalid. Even absent Article 232, local
government units cannot impose business taxes on petroleum
products. If anything, Article 232 merely reiterates what the LGC
itself already provides, with the additional explanation that such
prohibition was „in line with existing national policy.‰

PETITION for review on certiorari of a decision of the

Regional Trial Court of Malabon City, Br. 74.
The facts are stated in the opinion of the Court.
Belo, Gozon, Elma, Parel, Asuncion and Lucila for
petitioner.
Rodrigo C. Manio for respondents.

TINGA, J.:

The novel but important issue before us is whether a

local government unit is empowered under the Local
Government Code (the LGC) to impose business taxes on
persons or entities engaged in the sale of petroleum
products.

I.

The present Petition for Review on Certiorari under

Rule 45 filed by petitioner Petron Corporation (Petron)
directly assails the Decision of the Regional Trial Court
(RTC) of Malabon, Branch 74, which dismissed petitionerÊs
complaint for cancellation of assessment made by the then
municipality (now City) of Navotas (Navotas) for deficiency
taxes, and ordering the payment of P10,204,916.17 pesos in
business taxes to Navotas. As the issues raised are pure
questions of law, we need not dwell on the facts at length.

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Petron maintains a depot or bulk plant at the Navotas

Fishport Complex in Navotas. Through that depot, it has
engaged in the selling of diesel fuels to vessels used in
commercial fishing in and around Manila Bay.1 On 1 March
2002, Petron received a letter from the office of Navotas
Mayor, respondent Toby Tiangco, wherein the corporation
was assessed taxes „relative to the figures covering sale of
diesel declared by your Navotas Terminal from 1997 to
2001.‰2 The stated total amount due was P6,259,087.62, a
figure derived from the gross sales of the depot during the
years in question. The computation sheets3 that were
attached to the letter made reference to Ordinance 92-03,
or the New Navotas Revenue Code (Navotas Revenue
Code), though such enactment was not cited in the letter
itself.
Petron duly filed with Navotas a letter-protest to the
notice of assessment pursuant to Section 195 of the Code. It
argued that it was exempt from local business taxes in view
of Art. 232(h) of the Implementing Rules (IRR) of the LGC,
as well as a ruling of the Bureau of Local Government
Finance of the Department of Finance dated 31 July 1995,
the latter stating that sales of petroleum fuels are not
subject to local taxation. The letter-protest was denied by
the Navotas Municipal Treasurer, respondent Manuel T.
Enriquez, in a letter dated 8 May 2002.4 This was followed
by a letter from the Mayor dated 15 May 2002, captioned
„Final Demand to Pay,‰ requiring that Petron pay the
assessed amount within five (5) days from receipt thereof,
with a threat of closure of PetronÊs operations within
Navotas should there be no payment.5 Petron, through
counsel, replied to the Mayor by another letter posing
_______________

1 Rollo, p. 60.
2 Id., at p. 200.
3 Id., at pp. 201-205.
4 See Rollo, p. 26.
5 Id., at p. 210.

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Petron Corporation vs. Tiangco

objections to the threat of closure. The Mayor did not

respond to this last letter.6
Thus, on 20 May 2002, Petron filed with the Malabon
RTC a Complaint for Cancellation of Assessment for
Deficiency Taxes with Prayer for the Issuance of a
Temporary Restraining Order (TRO) and/or Preliminary
Injunction. The quested TRO was not issued by the
Malabon RTC upon manifestation of respondents that they
would not proceed with the closure of PetronÊs Navotas
bulk plant until after the RTC shall have decided the case
on the merits.7 However, while the case was pending
decision, respondents refused to issue a business permit to
Petron, thus prompting Petron to file a Supplemental
Complaint with Prayer for Preliminary Mandatory
Injunction against respondents.8
On 5 May 2003, the Malabon RTC rendered its Decision
dismissing PetronÊs complaint and ordering the payment of
the assessed amount.9 Eleven days later, Petron received a
Closure Order from the Mayor, directing Petron to cease
and desist from operating the bulk plant. Petron sought a
TRO from the Malabon RTC, but this was denied.10 Petron
also filed a motion for reconsideration of the order of
denial, but this was likewise denied.11
On 4 August 2003, this Court issued a TRO, enjoining
the respondents from closing PetronÊs Navotas bulk plant
or otherwise interfering in its operations.12

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6 Id., at p. 27.
7 Id., at p. 19.
8 Id., at pp. 158-164.
 9 Id., at pp. 60-69.
10 In an Order dated 19 June 2003.
11 In an Order dated 2 July 2003.
12 Rollo, pp. 213-215.

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II.
As earlier stated, Petron has opted to assail the RTC
Decision directly before this Court since the matter at hand
involves pure questions of law, a characterization conceded
by the RTC Decision itself. Particularly, the controversy
hinges on the correct interpretation of Section 133(h) of the
LGC, and the applicability of Article 232 (h) of the IRR.
Section 133(h) of the LGC reads as follows:

„Sec.  133. 
 Common Limitations on the Taxing Powers of
Local Government Units.·Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and Barangays shall not extend to the levy of the following:
xxx
 Excise taxes on articles enumerated under the National
(h) 
Internal Revenue Code, as amended, and taxes, fees or charges on
petroleum products;‰

Evidently, Section 133 prescribes the limitations on the

capacity of local government units to exercise their taxing
powers otherwise granted to them under the LGC.
Apparently, paragraph (h) of the Section mentions two
kinds of taxes which cannot be imposed by local
government units, namely: „excise taxes on articles
enumerated under the National Internal Revenue Code
[(NIRC)], as amended‰; and „taxes, fees or charges on
petroleum products.‰
The power of a municipality to impose business taxes is
provided for in Section 143 of the LGC. Under the
provision, a municipality is authorized to impose business
taxes on a whole host of business activities. Suffice it to
say, unless there is another provision of law which states
otherwise, Section 143, broad in scope as it is, would
undoubtedly cover the business of selling diesel fuels, or
any other petroleum product for that matter.
 Nonetheless, Article 232 of the IRR defines with more
particularity the capacity of a municipality to impose taxes
on

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490 SUPREME COURT REPORTS ANNOTATED

Petron Corporation vs. Tiangco

businesses. The enumeration that follows is generally a

positive list of businesses which may be subjected to
business taxes, and paragraph (h) of Article 232 does allow
the imposition of local business taxes „[o]n any business not
otherwise specified in the preceding paragraphs which the
sanggunian concerned may deem proper to tax,‰ but
subject to this important qualification, thus:

„x x x provided further, that in line with existing national policy,

any business engaged in the production, manufacture, refining,
distribution or sale of oil, gasoline and other petroleum products
shall not be subject to any local tax imposed on this article.‰

Notably, the Malabon RTC declared Art. 232(h) of the

IRR void because the LGC purportedly does not contain a
provision prohibiting the imposition of business taxes on
petroleum products.13 This submission warrants close
examination as well.
With all the relevant provisions of law laid out, we
address the core issues submitted by Petron, namely: first,
is the challenged tax on sale of the diesel fuels an excise
tax on an article enumerated under the NIRC, thusly
prohibited under Section 133(h) of the LGC?; second, is the
challenged tax prohibited by Section 133(h) under the
proviso, „taxes, fees or charges on petroleum products‰?
and; third, does Art. 232(h) of the IRR similarly prohibit
the imposition of the challenged tax?

III.

As earlier observed, Section 133(h) provides two kinds of

taxes which cannot be imposed by local government units:
„excise taxes on articles enumerated‰ under the NIRC, as
amended; and „taxes, fees or charges on petroleum
products.‰ There is no doubt that among the excise taxes on
articles
_______________

13 Id., at p. 66.

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enumerated under the NIRC are those levied on petroleum

products, per Section 148 of the NIRC.
We first consider PetronÊs argument that the „business
taxes‰ on its sale of diesel fuels partakes of an excise tax,
which if true, could invalidate the challenged tax solely on
the basis of the phrase „excise taxes on articles enumerated
under the [NIRC].‰ To support this argument, it cites
Cordero v. Gonda,14 Allied Thread Co. Inc. v. City Mayor of
Manila,15 and Iloilo Bottlers, Inc. v. City of Iloilo,16 as
having explained that „an excise tax is a tax upon the
performance, carrying on, or the exercise of an activity.‰17
Respondents, on the other hand, argue that what the
provision prohibits is the imposition of excise taxes on
petroleum products, but not the imposition of business
taxes on the same. They cite Philippine Petroleum
Corporation v. Municipality of Pililia,18 where the Court
had noted, „[a] tax on business is distinct from a tax on the
article itself.‰19
PetronÊs argument is fraught with far-reaching
implications, for if it were sustained, it would mean that
local government units are barred from imposing business
taxes on any of the articles subject to excise taxes under
the NIRC. These would include alcohol products,20 tobacco
products,21 mineral products22 automobiles,23 and such
non-essential goods as jewelry, goods made of precious
metals, perfumes, and yachts and other vessels intended
for pleasure or sports.24

_______________

14 124 Phil. 926; 18 SCRA 331 (1966).

15 218 Phil. 308; 133 SCRA 338 (1984).
16 G.R. No. L-52019, 19 August 1988, 164 SCRA 607.
17 Rollo, p. 31.
18 G.R. No. 90776, 3 June 1991, 198 SCRA 82.
19 Id., at p. 89.
 20 See Sections 141-143, NIRC.
21 See Sections 144-147, NIRC.
22 See Section 151, NIRC.
23 See Section 149, NIRC.
24 See Section 150, NIRC.

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Petron Corporation vs. Tiangco

Admittedly, the proffered definition of an excise tax as „a

tax upon the performance, carrying on, or exercise of some
right, privilege, activity, calling or occupation‰ derives from
the compendium American Jurisprudence, popularly
referred to as Am Jur;25 and has been cited in previous
decisions of this Court, including those cited by Petron
itself. Such a definition would not have been inconsistent
with previous incarnations of our Tax Code, such as the
NIRC of 1939,26 as amended, or the NIRC of 197727 because
in those laws the term „excise tax‰ was not used at all. In
contrast, the nomenclature used in those prior laws in
referring to taxes imposed on specific articles was „specific
tax.‰28 Yet beginning with the National Internal Revenue
Code of 1986, as amended, the term „excise taxes‰ was used
and defined as applicable „to goods manufactured or
produced in the Philippines⁄ and to things imported.‰29
This definition was carried over into the present NIRC of
1997.30 Further, these two latest codes categorize two
different kinds of excise taxes: „specific tax‰ which is
imposed and based on weight or volume capacity or any
other physical unit of measurement; and „ad valorem tax‰
which is imposed and based on the selling price or other
specified value of the goods. In other words, the meaning of
„excise tax‰ has undergone a transformation, morphing
from the Am Jur definition to its current signification
which is a tax on certain specified goods or articles.
The change in perspective brought forth by the use of
the term „excise tax‰ in a different connotation was not lost
on the

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25 See Footnote No. 27, Cordero v. Gonda, 124 Phil. 926, 937; 18 SCRA
331, 341 (1966); citing 51 Am. Jur., pp. 1068-1069.
26 Commonwealth Act No. 466, as amended.
27 Pres. Decree No. 1158.
28 See Title IV, Commonwealth Act No. 466; Title IV, Pres. Decree No.
1158.
29 See Sec. 126, Pres. Decree No. 1994, establishing National Internal
Revenue Code of 1986.
30 See Sec. 129, National Internal Revenue Code of 1997.

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departed author Jose Nolledo as he accorded divergent

treatments in his 1973 and 1994 commentaries on our tax
laws. Writing in 1973, and essentially alluding to the Am
Jur definition of „excise tax,‰ Nolledo observed:
Are specific taxes, taxes on property or excise taxes·

„In the case of Meralco v. Trinidad ([G.R.] 16738, 1925) it was

held that specific taxes are property taxes, a ruling which seems to
be erroneous. Specific taxes are truly excise taxes for the fact that
the value of the property taxed is taken into account will not change
the nature of the tax. It is correct to say that specific taxes are taxes
on the privilege to import, manufacture and remove from storage
certain articles specified by law.‰31

In contrast, after the tax code was amended to classify

specific taxes as a subset of excise taxes, Nolledo, in his
1994 commentaries, wrote:

„1. Excise taxes, as used in the Tax Code, refers to taxes

applicable to certain specified goods or articles manufactured or
produced in the Philippines for domestic sale or consumption or for
any other disposition and to things imported into the Philippines.
They are either specific or ad valorem.
2. Nature of excise taxes.·They are imposed directly on certain
specified goods. (infra) They are, therefore, taxes on property. (see
Medina vs. City of Baguio, 91 Phil. 854.)
A tax is not excise where it does not subject directly the produce
or goods to tax but indirectly as an incident to, or in connection
with, the business to be taxed.‰32

In their 2004 commentaries, De Leon and De Leon

restate the Am Jur definition of excise tax, and observe
that the term is „synonymous with Âprivilege taxÊ and [both
terms] are often

_______________

31 J. NOLLEDO, NATIONAL INTERNAL REVENUE CODE OF THE PHILIPPINES

(1973 ed.), at pp. 678-679.
32 J. NOLLEDO, THE NATIONAL INTERNAL REVENUE CODE ANNOTATED (5th
ed., 1994), at pp. 471-472.

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Petron Corporation vs. Tiangco

used interchangeably.‰33 At the same time, they offer a

caveat that „[e]xcise tax, as [defined by Am Jur], is not to
be confused with excise tax imposed [by the NIRC] on
certain specified articles manufactured or produced in, or
imported into, the Philippines, Âfor domestic sale or
consumption or for any other disposition.Ê ‰34
It is evident that Am Jur aside, the current definition of
an excise tax is that of a tax levied on a specific article,
rather than one „upon the performance, carrying on, or the
exercise of an activity.‰ This current definition was already
in place when the LGC was enacted in 1991, and we can
only presume that it was what the Congress had intended
as it specified that local government units could not impose
„excise taxes on articles enumerated under the [NIRC].‰
This prohibition must pertain to the same kind of excise
taxes as imposed by the NIRC, and not those previously
defined „excise taxes‰ which were not integrated or
denominated as such in our present tax law.
It is quite apparent, therefore, that our current body of
taxation law does not explicitly accommodate the
traditional definition of excise tax offered by Petron. In
fact, absent any statutory adoption of the traditional
definition, it may be said that starting in 1986 excise taxes
in this jurisdiction refer exclusively to specific or ad
valorem taxes imposed under the NIRC. At the very least,
it is this concept of excise tax which we can reasonably
assume that Congress had in mind and actually adopted
when it crafted the LGC. The palpable absurdity that
ensues should the alternative interpretation prevail all but
strengthens this position.
 Thus, PetronÊs argument concerning excise taxes is
founded not on what the NIRC or the LGC actually
provides, but on a non-statutory definition sourced from a
legal paradigm that is

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33 H. DE LEON & H. DE LEON, JR., THE FUNDAMENTALS OF TAXATION (14th

ed., 2004), at pp. 12-13.
34 Id., at p. 13.

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no longer applicable in this jurisdiction. That such

definition was referred to again in our 1998 decision in
Province of Bulacan v. Court of Appeals35 is ultimately of
little consequence, and so is PetronÊs reliance on such
ruling. The Court therein had correctly nullified, on the
basis of Section 133(h) of the LGC, a province-imposed tax
„of 10% of the fair market value in the locality per cubic
meter of ordinary stones, sand, gravel, earth and other
quarry resources x x x extracted from public lands,‰
because it noted that under Section 151 of the NIRC, all
nonmetallic minerals and quarry resources were assessed
with excise taxes of „two percent (2%) based on the actual
market value of the gross output thereof at the time of
removal, in case of those locally extracted or produced.‰36
Additionally, the Court also observed that the case had
emanated from an attempt to impose the said tax on
quarry resources from private lands, despite the clear
language of the tax ordinance limiting the tax to such
resources extracted from public lands.37 On that score
alone, the case could have been correctly decided.
It is true that the Court had additionally reasoned in
Province of Bulacan that „[t]he tax imposed by the Province
of Bulacan is an excise tax, being a tax upon the
performance, carrying on, or exercise of an activity.‰ As
earlier noted, such definition of excise tax however was not
explicitly carried over into the NIRC and was even
superseded beginning with the 1986 amendments thereto.
To insist on utilizing this definition simply because it had
been reiterated in Province of Bulacan, unnecessary as
such reiteration may have been to the resolution of that
case, would have the unfortunate effect of infusing life into
a concept that is diametrically inconsistent with the
present state of the law.
We thus can assert with clear comfort that excise taxes,
as imposed under the NIRC, do not pertain to „the
performance,

_______________

35 359 Phil. 779; 299 SCRA 442 (1998).

36 Id., at pp. 794-795; p. 456.
37 Id., at p. 795; p. 457.

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Petron Corporation vs. Tiangco

carrying on, or exercise of an activity,‰ at least not to the

extent of equating excise with business taxes.

IV.

We next consider whether the clause „taxes, fees or

charges on petroleum products‰ in Section 133(h) precludes
local government units from imposing business taxes based
on the sale of petroleum products.
The power of a municipality to impose business taxes
derives from Section 143 of the LGC that specifically
enumerates several types of business on which it may
impose taxes, including manufacturers, wholesalers,
distributors, dealers of any article of commerce of whatever
nature;38 those engaged in the export or commerce of
essential commodities;39 retailers;40 contractors and other
independent contractors;41 banks and financial
42
institutions; and peddlers engaged in the sale of any
merchandise or article of commerce.43 This obviously broad
power is further supplemented by paragraph (h) of Section
143 which authorizes the sanggunian to impose taxes on
any other businesses not otherwise specified under Section
143 which the sanggunian concerned may deem proper to
tax.44
This ability of local government units to impose business
or other local taxes is ultimately rooted in the 1987
Constitution. Section 5, Article X assures that „[e]ach local
government unit shall have the power to create its own
sources of revenues and to levy taxes, fees and charges,‰
though the power is „subject

_______________

38 See Section 143 (a) & (b), Local Government Code.

39 See Section 143(c), Local Government Code.
40 See Section 143(d), Local Government Code.
41 See Section 143(e), Local Government Code.
42 See Section 143(f), Local Government Code.
43 See Section 143(g), Local Government Code.
44 See Yamane v. BA Lepanto, G.R. No. 154993, 25 October 2005, 474
SCRA 258, 272-273.

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to such guidelines and limitations as the Congress may

provide.‰ There is no doubt that following the 1987
Constitution and the Code, the fiscal autonomy of local
government units has received greater affirmation than
ever. Previous decisions that have been skeptical of the
viability, if not the wisdom of reposing fiscal autonomy to
local government units have fallen by the wayside.
Respondents cite our declaration in City Government of
San Pablo v. Reyes45 that following the 1987 Constitution
the rule thenceforth „in interpreting statutory provisions
on municipal fiscal powers, doubts will have to be resolved
in favor of municipal corporations.‰46 Such policy is also
echoed in Section 5(a) of the Code, which states that „[a]ny
provision on a power of a local government unit shall be
liberally interpreted in its favor, and in case of doubt, any
question thereon shall be resolved in favor of devolution of
powers and of the lower local government unit.‰ But
somewhat conversely, Section 5(b) then proceeds to assert
that „[i]n case of doubt, any tax ordinance or revenue
measure shall be construed strictly against the local
government unit enacting it, and liberally in favor of the
taxpayer.‰47 And this latter qualification has to be
respected as a constitutionally authorized limitation which
Congress has seen fit to provide. Evidently, local fiscal
autonomy should not necessarily translate into abject
deference to the power of local government units to impose
taxes.
Congress has the constitutional authority to impose
limitations on the power to tax of local government units,
and Sec-

_______________

45 364 Phil. 842; 305 SCRA 353 (1999).

46 Id., at p. 857; p. 365.
47 Section 5(b) also provides, „Any tax exemption, incentive or relief
granted by any local government unit pursuant to the provisions of this
Code shall be construed strictly against the person claiming it; x x x‰
This proviso should find no application to this case, since the tax
exemption invoked by Petron was not granted or legislated by Navotas,
but bestowed by the Congress through the Local Government Code.

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Petron Corporation vs. Tiangco

tion 133 of the LGC is one such limitation. Indeed, the

provision is the explicit statutory impediment to the
enjoyment of absolute taxing power by local government
units, not to mention the reality that such power is a
delegated power. To cite one example, under Section 133(g),
local government units are disallowed from levying
business taxes on „business enterprises certified to by the
Board of Investments as pioneer or non-pioneer for a period
of six (6) and (4) four years, respectively from the date of
registration.‰
Section 133(h) states that local government units „shall
not extend to the levy of xxx taxes, fees or charges on
petroleum products.‰ Respondents assert that the phrase
„taxes, fees or charges on petroleum products‰ pertains to
the imposition of direct or excise taxes on petroleum
products, and not business taxes. If the phrase actually
pertains to excise taxes, then it would be an exercise in
utter redundancy, since the preceding phrase already
prohibits the imposition of excise taxes on articles already
subject to such taxes under the NIRC, such as petroleum
products. There would be no sense on the part of the
legislature to twice emphasize in the same sentence that
excise taxes on petroleum products are beyond the pale of
local government taxation.
It appears that this argument of respondents was
fashioned on the basis of the pronouncement of the Court
in Philippine Petroleum Corporation v. Municipality of
Pililla, thus:48

„x x x [W]hile Section 2 of P.D. 436 prohibits the imposition of

local taxes on petroleum products, said decree did not amend
Sections 19 and 19 (a) of P.D. 231 as amended by P.D. 426, wherein
the municipality is granted the right to levy taxes on business of
manufacturers, importers, producers of any article of commerce of
whatever kind or nature. A tax on business is distinct from a
tax on the article itself. Thus, if the imposition of tax on business
of manufacturers, etc. in petroleum products contravenes a declared
national policy, it should have been expressly stated in P.D. No.
436.‰

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48 Supra note 18 at p. 89.

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The dicta that „[a] tax on a business is distinct from a

tax on the article itself‰ might at first blush somehow lend
support to respondentsÊ position, yet that dicta has not
since been reprised by this Court. It is likewise worth
observing that Pililla did involve a tax ordinance that
imposed business taxes on an enterprise engaged in the
manufacture and storage of petroleum products.
Significantly, the legal milieu governing Pililla is vastly
different from that existing at bar, to the extent that the
earlier case could not be presently controlling.
At the time the taxes sought to be collected in Pililla
were imposed, there was no national law in place similar to
Section 133(h) of the LGC that barred local „taxes, fees or
charges on petroleum products.‰ There were circulars to
that effect issued by the Finance Department, yet the
Court could not validate such issuances since under the tax
laws then in place „no exemptions were given to
manufacturers, wholesalers, retailers, or dealers in
petroleum products.‰49 In fact, the Court tellingly observed
that „if the imposition of tax on business of manufacturers,
etc. in petroleum products contravenes a declared national
policy, it should have been expressly stated in P.D. No.
436.‰50 Such expression conspiciously missing in P.D. No.
436 is now found in Section 133(h).
In view of the difference in statutory paradigm between
this case and Pililla, the latter case is severely diminished
as applicable precedent at bar. The Court then was correct
in observing that a mere administrative circular could not
prohibit a local tax that is not otherwise barred under a
national statute, yet in this case that conflict is not present
since the LGC explicitly prohibits the imposition of several
classes of local taxes, including those on petroleum
products. The final and only straw Pililla provides that
respondents can still grasp at is the bare statement that
„[a] tax on a business is

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49 Id., at p. 89.
50 Id.

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distinct from a tax on the article itself,‰51 a sentence which

could have been omitted from that decision without any
effect.
We can concede that a tax on a business is distinct from
a tax on the article itself, or for that matter, that a business
tax is distinct from an excise tax. However, such distinction
is immaterial insofar as the latter part of Section 133(h) is
concerned, for the phrase „taxes, fees or charges on
petroleum products‰ does not qualify the kind of taxes, fees
or charges that could withstand the absolute prohibition
imposed by the provision. It would have been a different
matter had Congress, in crafting Section 133(h), barred
„excise taxes‰ or „direct taxes,‰ or any category of taxes
only, for then it would be understood that only such
specified taxes on petroleum products could not be imposed
under the prohibition. The absence of such a qualification
leads to the conclusion that all sorts of taxes on petroleum
products, including business taxes, are prohibited by
Section 133(h). Where the law does not distinguish, we
should not distinguish.
The language of Section 133(h) makes plain that the
prohibition with respect to petroleum products extends not
only to excise taxes thereon, but all „taxes, fees and
charges.‰ The earlier reference in paragraph (h) to excise
taxes comprehends a wider range of subjects of taxation: all
articles already covered by excise taxation under the NIRC,
such as alcohol products, tobacco products, mineral
products, automobiles, and such non-essential goods as
jewelry, goods made of precious metals, perfumes, and
yachts and other vessels intended for pleasure or sports. In
contrast, the later reference to „taxes, fees and charges‰
pertains only to one class of articles of the many subjects of
excise taxes, specifically, „petroleum products.‰ While local
government units are authorized to burden all such other
class of goods with „taxes, fees and charges,‰ excepting
excise taxes, a specific prohibition is im-

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51 Supra note 19.

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posed barring the levying of any other type of taxes with

respect to petroleum products.

V.

We no longer need to dwell on the arguments centering

on Article 232 of the IRR. As earlier stated, the provision
explicitly stipulates that „in line with existing national
policy, any business engaged in the production,
manufacture, refining, distribution or sale of oil, gasoline
and other petroleum products shall not be subject to any
local tax imposed on this article [on business taxes].‰ The
RTC went as far as to declare Article 232 as „invalid‰ on
the premise that the prohibition was not similarly
warranted under the LGC.
 Assuming that the LGC does not, in fact, prohibit the
imposition of business taxes on petroleum products, we
would agree that the IRR could not impose such a
prohibition. With our ruling that Section 133(h) does
indeed prohibit the imposition of local business taxes on
petroleum products, however, the RTC declaration that
Article 232 was invalid is, in turn, itself invalid. Even
absent Article 232, local government units cannot impose
business taxes on petroleum products. If anything, Article
232 merely reiterates what the LGC itself already provides,
with the additional explanation that such prohibition was
„in line with existing national policy.‰

VI.

We have said all that need be said for the resolution of

this case, but there is one more line of argument raised by
respondents that deserves a remark. Respondents argue,
„assuming... that the Oversight Committee [that drafted
the IRR] can legislate, that the „existing national policy‰
referred to in Article 232 had been superseded by Republic
Act No. 8180, or the Oil Deregulation Law. Boiled down to
its essence, the argument is that since the oil industry is
presently deregulated the basis for exempting petroleum
products from business taxes no longer exists.

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Petron Corporation vs. Tiangco

Of course, the starting premise for this argument, that

the IRR can establish a tax or an exemption, is false and
has been flatly rejected by this Court before.52 The LGC
itself does not connect its prohibition on taxation of
petroleum products with any existing or future national oil
policy, so the change in such national policy with the
regime of oil deregulation is ultimately of no moment. Still,
we can divine the reasoning behind singling out petroleum
products, among all other commodities, as beyond the
power of local government units to levy local taxes.
Why the special concern over petroleum products? The
answer is quite evident to all sentient persons. In this age
where unfortunately dependence on petroleum as fuel has
yet no equally feasible alternative, the cost of petroleum
products, though fully controlled by private enterprise,
remains an area of public concern. To be blunt about it,
there is an inevitable link between the fluctuation of oil
prices and the prices of every other commodity. The reality,
indeed, is oil is a political commodity. Such fact has
received recognition from this Court. „[O]il [is] a commodity
whose supply and price affect the ebb and flow of the
lifeblood of the nation. Its shortage of supply or a slight,
upward spiral in its price shakes our economic foundation.
Studies show that the areas most impacted by the
movement of oil are food manufacture, land transport,
trade, electricity and water.‰53 „[T]he upswing and
downswing of our economy materially depend on the
oscillation of oil.‰54 „Fluctuations in the supply and price of
oil products have a dramatic effect on economic
development and public welfare.‰55

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52 See e.g., John Hay PeopleÊs Alternative Coalition v. Lim, 460 Phil.
530, 551; 414 SCRA 356, 377 (2003).
53 Tatad v. Secretary of Energy, 346 Phil. 321, 379; 281 SCRA 330, 369
(1997).
54 Id., at p. 348.
55 Garcia v. Corona, 378 Phil. 848, 859; 321 SCRA 218, 225 (1999).

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It can be reasonably presumed that if municipalities,

cities and provinces were authorized to impose business
taxes on manufacturers and retailers of petroleum
products, the resulting losses to these enterprises would be
passed on to the consumers, triggering the chain of
increases that normally accompany the increase in oil
prices. No similarly massive trigger effect would ensue
upon the imposition of business taxes on other
commodities, including those already subject to excise
taxation under the NIRC.
It may very well be that the policy of deregulation,
which was not yet in effect at the time of the enactment of
the Local Government Code (LGC), has changed the
complexion of the issue, for unlike before, oil companies are
free at will to increase oil prices, thus mitigating the
similarly arbitrary consequences that could develop if
petroleum products were subject to local taxes. Still, it
cannot be denied that subjecting petroleum products to
business taxes apart from the taxes already imposed by
Congress in this age of deregulation would lead to the same
result had they been so taxed during the era of oil
regulation·the increase of oil prices. We do not discount
the authority of Congress to enact measures that facilitate
the increase in oil prices; witness the Oil Deregulation Law
and the most recent Expanded VAT Law. Yet these hard
choices are presumably made by Congress with the
expectation that the negative effects of increased oil prices
are offset by the other economic benefits promised by those
new laws (i.e., a more vibrant oil industry; increased
government revenue).
The Court defers to the other branches of government in
the formulation of oil policy, but when the choices are made
through legislation, the Court expects that the choices are
deliberate, considering that the stakes are virtually all-in.
Herein, respondents may be bolstered by the constitutional
and statutory policy favoring local fiscal autonomy, but it
would be utter indolence to reflexively affirm such policy
when the inevitable effect is an increase in oil prices. Any
prudent adjudication should fully ascertain the mandate of

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Petron Corporation vs. Tiangco

local government units to impose taxes on petroleum

products, and such mandate should be cast in so specific
terms as to leave no dispute as to the legislative
intendment to extend such power in the name of local
autonomy. What we have found instead, from the plain
letter of the law is an explicit disinclination on the part of
the legislature to impart that particular taxing power to
local government units.
While Section 133(h) does not generally bar the
imposition of business taxes on articles burdened by excise
taxes under the NIRC, it specifically prohibits local
government units from extending the levy of any kind of
„taxes, fees or charges on petroleum products.‰ Accordingly,
 the subject tax assessment is ultra vires and void.
WHEREFORE, the Petition is GRANTED. The Decision
of the Regional Trial Court of Malabon City in Civil Case
No. 3380-MN is REVERSED and SET ASIDE and the
subject assessment for deficiency taxes on petitioner is
ordered CANCELLED. The Temporary Restraining Order
dated 4 August 2003 is hereby made PERMANENT. No
pronouncement as to costs.
SO ORDERED.

Quisumbing (Chairperson), Carpio-Morales, Velasco,

Jr. and Brion, JJ., concur.

Petition granted, judgment of Regional Trial Court of

Malabon City, Br. 74 reversed and set aside.

Note.·Those who claim to be exempt from the payment

of a particular tax must do so under clear and
unmistakable terms found in the statute. (Commissioner of
Internal Revenue vs. Solidbank Corporation, 416 SCRA 436
[2003])

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